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The European Commission has acknowledged the “certain overlap” between the Payment Services Directive (PSD2) and the Markets in Crypto-Assets (MiCA) regulation, calling for supervisory authorities to take action.
Concerns surrounding possible overlays between the EU’s payment services and crypto legal frameworks have sparked an intervention from the Commission, following lobbying from crypto lobbyists over the last year.
As it stands, the EU’s regulatory frameworks will mean that where crypto-asset service providers (CASPs) provide payment services with e-money tokens (EMTs), they must either hold a payment service provider (PSP) authorisation or partner with an authorised PSP.
Yet the letter, signed by senior EU official John Berrigan, and sent to the chiefs of both the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), warns that this dual compliance requirement can impose a heavy burden, especially when EMTs are used for purposes beyond payments, such as investment or trading.
The letter also highlights diverging interpretations among member states regarding the application of MiCA and PSD2. For example, some national authorities treat EMT-related services by CASPs as payment services requiring dual authorization, while others may not.
“In view of these diverging interpretations, the application of both PSD2 and MiCA provisions in relation to EMT services may raise significant issues of regulatory arbitrage, as well as consumer protection issues,” the letter says.
In some scenarios, Berrigan has also pointed out that CASPs providing EMT-related services for investment or trading purposes, without facilitating payment transactions, may still fall under PSD2's broad definition of "payment transactions”, adding that this unintended overlap creates legal uncertainty and operational burdens.
To deal with this issue, the Commission has urged the EBA to issue a “no action letter,” temporarily suspending the enforcement of PSD2 authorisation requirements for CASPs engaged in non-payment-related EMT activities.
So-called no action letters are commonplace in the US as well as the EU, with the EBA having issued one as recently as last year.
They can be used to deal quickly with legal uncertainty around certain issues, limiting the risk of companies facing enforcement action when trying their best to comply with regulatory overlaps or arbitrage, as looks to be the case with PSD2 and MiCA.
Such a measure would remain in effect until the anticipated application of the updated PSD3 and Payment Services Regulation (PSR) (currently under negotiation and unlikely to be fully agreed upon and signed into law until later in 2025).
Additionally, the Commission has also proposed streamlining the PSD2 authorisation process for CASPs that do require dual authorisation, while inviting the EBA and ESMA to suggest legislative changes to address these issues in the PSD3/PSR discussions.
In response to the Commission, the chair of the EBA wrote a short response saying: “I concur with your concerns raised in the letter and I have asked the EBA staff to carefully assess the issues”.
Campa confirmed that in coordination with ESMA colleagues, the regulator will work to “assess the best options going forward with the aim to publish our response by April 2025”.
An important issue
The regulatory interaction between PSD2 and MiCA has been a focal point for Brussels, with increasing concerns that the two frameworks will be burdensome for firms to comply with.
For example, while speaking at Blockchain For Europe’s 2023 summit in Brussels, National Bank of Belgium’s Anne Chamberod admitted that the "difficult application of PSD2 to the crypto ecosystem" is a question that often comes up.
"We do have a lot of questions as to 'do I need to apply for a MiCA licence or for a PSD licence?', or 'do I provide customer services for EMT only?', 'do I need to apply strong customer authentication to EMT accounts?'," she said. "These are the types of questions that are key for the sector but also for the regulator."
Elisabeth Noble, senior policy advisor at the EBA, acknowledged she had come across similar issues, saying that there is a "serious cohesion question" and suggesting that the regulator may issue guidance.
Commenting on the latest development, Kamil Mosoń, associate at DLK Legal, said that the Commission has “raised a very important issue”.
“In their letter, they highlighted one example they believe does not require PSP authorisation, an exchange service. This assessment is logical and reasonable," he said. “In general, an exchange service does not constitute a payment service, as there is no intermediation, which is a key characteristic of a payment service.”
However, the Poland-based lawyer pointed out that this “is just a single example, and a fairly obvious one at that”.
“Many borderline cases in the crypto space remain uncertain in their proper classification, such as transfers of EMTs only for custody purposes or settlements related to trading,” he said. “It would be highly valuable to have the supervisory authorities clarify their stance on these more ambiguous cases.”
Mosoń suggested that a "no action letter" will provide some clarity.
Nevertheless, even if a no action letter is issued — and given the EBA’s answer to the Commission’s letter, some response should be expected — he said that it “is unlikely to resolve all the issues”, and that further case-by-case analysis will still be required.
“In any case, MiCA is becoming fully applicable very soon and this type of action should have been initiated much earlier.”
